WASHINGTON (Reuters) - The chairman of the U.S. Senate Banking Committee on Wednesday expressed concern that JPMorgan Chase & Co head Jamie Dimon held a Federal Reserve Bank of New York board seat while his bank was in talks with the Federal Reserve over a deal to acquire Bear Stearns.
Sen. Christopher Dodd made his remarks in an interview with National Public Radio.
With support from the Fed and the Treasury Department, Bear Stearns Cos Inc has agreed to be sold to JPMorgan for about $10 a share. As part of the deal, the Fed agreed to guarantee up to $29 billion of Bear Stearns’ assets.
“I have great respect for Jamie Dimon, who’s head of JPMorgan,” Dodd, a Connecticut Democrat, said in the interview with National Public Radio.
“He also sits on the board of directors at the Federal Reserve in New York. Having decisions being made over the weekend with an institution where its leader is also a member of that board raises some serious issues,” Dodd said. “It aught to be addressed.”
When asked if he suspects Dimon’s New York Fed board seat, which expires December 31, 2009, might have been a conflict of interest, Dodd said: “This is what we needed to talk about.”
Dimon is the chairman and chief executive of JPMorgan Chase.
Dodd said he is willing to accept the intervention by federal regulators as a one-time event, but would be worried if it becomes a model to tackle future problems.
“If that’s the case then I’m deeply worried about it,” Dodd said in the NPR interview. “The idea that we’re creating a permanent model for future events like this is troubling to me because of the idea that the American taxpayer has been put on the hook here,” he said.
“And I’m hoping that it never comes to that.”
Dodd on Wednesday said JPMorgan’s bid to acquire Bear Stearns Cos Inc raises regulatory and American taxpayer concerns, and he plans to hold a hearing next week to examine the role the regulators played in the transaction.
Dodd said he invited Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox to testify at an April 3 hearing.
He also invited Dimon and Bear Stearns CEO Alan Schwartz to testify to explain the transaction which kept Bear Stearns from entering into bankruptcy.
The boards of the Federal Reserve’s regional banks are meant to be representative of their communities and it is not uncommon for industry leaders and others to sit on the boards.
In addition to Dimon, the New York Fed board’s members include Richard Fuld, chairman and chief executive officer of investment bank Lehman Brothers Holdings Inc; Jeffrey Immelt, chairman and chief executive officer of General Electric Co; New York state AFL-CIO President Denis Hughes; and Columbia University President Lee Bollinger, according to the bank’s Web site.
Reporting by John Poirier; Editing by Leslie Adler